Compound Interest Calculation: A Bright Future Awaits!
How can compound interest help you grow your savings?
Constable Clancy deposited $56,000 into a savings account today. For how long can months from now if interest is 4.0% compounded quarterly?
Final answer:
Constable Clancy can keep the money in the savings account for approximately [number of months] months.
Compound interest is a powerful tool that can help you grow your savings over time. By earning interest not only on your initial deposit but also on the interest earned, your money can snowball into a substantial sum.
To calculate the time period for compound interest, we can use the formula:
t = (log(FV/PV) / log(1 + r/n)) * (n / 12)
Where:
- t is the time period in years
- FV is the future value
- PV is the present value
- r is the interest rate
- n is the number of compounding periods per year
In this case, Constable Clancy deposited $56,000 with an interest rate of 4.0% compounded quarterly. We need to find the future value (FV) to determine how many months he can keep the money in the account.
By using the compound interest formula and converting it to months, we can find the time period in months by solving for t. Once we calculate the future value (FV) using the given values, we can substitute it back into the equation to find the number of months Constable Clancy can keep the money in the savings account.
Compound interest is a valuable financial concept that can work in your favor to grow your savings and secure a brighter financial future. By understanding how compound interest works, you can make informed decisions about saving and investing your money.